Indian Gem & Jewellery Industry Analyses U.S. Reciprocal Tariff Plan’s Impact on $11.58 Billion of Exports
India’s flourishing gem and jewellery sector, a vital component of its export-driven economy, faces uncertainty as the United States introduces its “Fair and Reciprocal Plan” on Trade. Announced by President Donald Trump on 13th February 2025, this policy aims to address trade imbalances by imposing reciprocal tariffs equivalent to those levied on American goods by other nations. For India, a key supplier of gems and jewellery to the U.S., this could mean new tariffs ranging between 5% and 20% on nearly $10 billion worth of annual exports. If implemented, the move could disrupt the industry, which employs millions across the country.
India-U.S. Trade Relationship in the Gem & Jewellery Sector
The longstanding trade relationship between India and the U.S. in the gem and jewellery sector has been significant. In FY 2023-2024, India’s global gem and jewellery exports amounted to $32.85 billion, with the U.S. accounting for a substantial 30.28% share ($9.95 billion). Meanwhile, in Calendar Year 2024, India supplied 12.99% ($11.58 billion) of America’s total $89.12 billion gem and jewellery imports, as per data from the U.S. International Trade Commission (USITC).
U.S. Trade Deficit and Tariff Adjustments
Despite this robust trade exchange, the U.S. faces a trade deficit of $6.27 billion with India in this sector. The Trump administration is looking to address this imbalance by adjusting tariffs to match India’s current rates, which stand at an average of 8.63%, significantly higher than the U.S.’s present 3.17%.
Strategic Policy Shift for Fair Trade
According to a White House statement, the policy is aimed at “restoring fairness in U.S. trade relationships and countering non-reciprocal trading arrangements.” The measure is expected to realign tariff structures to create a more level playing field in international trade.
India-USA G&J Trade Scenario (US$ Billion)
Industry Insights:
Mr. Adil Kotwal, President, SEEPZ Gems & Jewellery Manufacturers’ Association (SGJMA), highlights, “The US’s proposed reciprocal tariff policy poses a serious threat to SEEPZ’s jewellery export sector, which accounts for 85% of India’s diamond-studded jewellery exports to the US. This industry is highly labour-intensive, directly employing 50,000 workers and supporting over 1 lakh more. A sudden tariff hike could severely impact exports, putting thousands of livelihoods at risk. We urge the Indian government to negotiate for a fair duty structure or consider lowering India’s import duty on US jewellery to a more reciprocal level.”
India exports a wide variety of jewellery and gemstone products to the U.S., including cut and polished diamonds worth $5.6 billion, studded gold jewellery valued at $2.55 billion, plain gold jewellery at $267 million, lab-grown diamonds reaching $831 million, and silver jewellery contributing $320 million. However, gold jewellery and diamonds, which form the backbone of India’s jewellery exports, are most vulnerable to tariff hikes.
The current disparity in tariff structures puts India at a disadvantage. While India imposes a 20% tariff on U.S. gold jewellery, the U.S. charges only 5.5-7% on similar Indian exports. Likewise, India levies a 5% tariff on cut and polished diamonds, whereas the U.S. imposes none. Under the new reciprocal tariff plan, the U.S. could increase these rates, potentially reducing India’s competitiveness in the American market.
A similar scenario unfolded when the U.S. withdrew India’s Generalized System of Preferences (GSP) benefits in 2007. This led to a drastic 50% decline in India’s gold jewellery exports to the U.S., plummeting from $2.21 billion to $1.01 billion in just a year. The recovery process took nearly 15 years, underscoring the long-term impact such policy shifts can have on India’s jewellery exports.
Mr. Dinesh Lakhani, Global Director, Kiran Gems Pvt. Ltd., states, “Reciprocal tariffs will be detrimental for India’s gem and jewellery exports as well as U.S. jewellery retail. After two years of softness, any price inflation from tariffs would impact demand. Small independent retailers in the U.S. and MSME exporters in India—both huge employment generators—will suffer most as a direct consequence of reciprocal tariffs.
From the U.S. perspective, Mr. David Bonaparte, President & CEO of Jewelers of America, echoes concerns about rising costs: “If it is determined that India’s current tariffs are not fair compared to how India’s goods are imported to the U.S., then I assume that the U.S. will raise tariffs on India’s goods. This would ultimately raise prices for U.S. manufacturers and retailers.” However, he adds a note of cautious support for the policy’s intent, stating, “We support the Trump administration’s goal of strengthening trade relationships and creating fair and favourable terms for America. The jewellery industry is challenging at the moment, and we need policies that help our industry and partners do business.” Mr. Bonaparte emphasises that Jewelers of America “will continue to work to protect jewellers on legislative issues and would work with other industry stakeholders to push back on measures that would hurt the industry.”
The Gemological Institute of America (GIA) also acknowledges the potential ripple effects, with a spokesperson noting, “GIA is aware of proposals for a tariff regime that could potentially affect gems sent to GIA locations in the United States for grading and identification services, but we cannot speculate on how any potential tariffs might affect submissions.”
Mr. Ajesh Mehta, Convener – Diamond Panel, the Gem & Jewellery Export Promotion Council (GJEPC), explains, “India exports larger stones to the U.S., where loose diamonds face no duty, but jewellery carries a 6% tariff. Centre stones go loose to the U.S. and are set there by American jewellers, while semi-mounts from India bear the 6% duty. If a 5%-6% tariff hits loose diamonds, it’ll drastically raise jewellery costs—a $10,000 stone jumps by $500-$600. This isn’t a win for the U.S.—it kills their jewellers’ labour advantage. Margins for Indian diamond manufacturers will vanish, sales will plummet, and rough diamond prices must drop 6% to compensate—or the trade shifts to Botswana and Namibia, where diamonds enter the U.S. duty-free. We must fight this; these are raw materials for their industry, not finished products.”
The impact could be particularly acute in regions like Jaipur, a hub for coloured gemstones. Mr. Arvind Gupta, President, Sitapura Gems and Jewellery Industry Association (SGJIA), states, “I believe the US is retaliating in this situation, and this is not a good position, especially for the Indian gems and jewellery industry. Both silver and gold jewellery export production will be impacted as India is already facing severe challenges in this area. If these US tariffs are implemented, the direct benefit will shift to countries like Thailand and Vietnam. Right now, India has a low volume of finished jewellery imports from America. So if we negotiate strongly with the US, we will be in a win-win situation. India must acknowledge this issue and take the right approach. I believe we should do so because we have the upper hand in this situation.”
In a joint phone call, Mr. Alok Sonkhia, President, Jewellers Association Jaipur (JAJ) and Mr. Neeraj Lunawat, Secretary, JAJ, caution, “The proposed reciprocal duties by the US government on Indian gem and jewellery exports, especially coloured gemstones, could severely impact the Jaipur industry. The US is our largest market, and increased tariffs would likely drive business to Thailand, which has a more favourable duty structure. This would jeopardise significant US orders and threatens the livelihoods of 150,000 coloured gemstone cutters and 300,000 workers in Jaipur’s overall gems and jewellery sector.”
Mr. Alkesh Shah, Vice Chairman of Goldstar Jewellery, outlines broader implications: “Increased tariffs could make Indian exports less competitive compared to destinations like Thailand, Vietnam, and Korea, affecting market share and profit margins. Supply chain disruptions might push manufacturers to explore alternative trade routes or shift production offshore. The industry, heavily reliant on skilled artisans and MSMEs, could experience significant strain if orders from US buyers decline.”
Similarly, Mr. Priyanshu Shah, Director of Asian Star, emphasises adaptability: “The U.S. remains a key market for India’s gem and jewellery exports, and any changes in the tariff structure will naturally have implications for trade dynamics. A reciprocal tariff framework could alter pricing structures and impact demand, particularly for key commodities like polished diamonds and finished jewellery.
“Higher tariffs may affect the cost competitiveness of Indian exports, making it crucial for the industry to focus on strengthening its value proposition and adaptability in an evolving global market. While it is still early to assess the full impact, such policy shifts highlight the need for strategic planning within the industry. Businesses will need to evaluate cost structures, enhance product differentiation, and optimise supply chains to sustain their competitive edge. Industry and policymakers must engage to ensure a balanced trade environment that fosters mutual prosperity and job creation.”
Mr. Colin Shah, Managing Director of Kama Jewelry, remains cautiously optimistic: “At this stage, we don’t anticipate an immediate impact, as discussions are ongoing at the government level. However, if implemented, tariffs will increase costs, affecting demand for diamonds, gold jewellery, and coloured gemstones. We’re optimising costs and strengthening our presence in Europe and the Middle East to diversify risks, but industry-wide collaboration and government engagement will be key to sustaining growth despite evolving trade policies.”
To mitigate the potential fallout, the industry proposes tariff concessions in a potential India-U.S. Free Trade Agreement (FTA). Recommendations include slashing India’s tariffs on polished diamonds and lab-grown diamonds from 5% to 2.5%, reducing gold, silver, and platinum jewellery tariffs from 20% to 17%, and cutting duties on precious metals like gold bars from 5% to 4%. These measures could boost U.S. exports to India—projected to rise by $6.23 billion, including 65 tons of gold ($6 billion)—and narrow the trade deficit. Kotwal urges, “We need the Indian government to negotiate for a fair duty structure or consider lowering India’s import duty on US jewellery to a more reciprocal level.”
Mr. Kirit Bhansali, Chairman, GJEPC, comments: “Our industry has already flagged its concerns over US reciprocal tariffs, and we trust our government to address them. With Hon’ble Prime Minister Shri Narendra Modi and Hon’ble Commerce & Industry Minister Shri Piyush Goyal actively engaging in bilateral trade discussions, we are confident that a resolution will be reached to safeguard India’s gem and jewellery exports.
“This policy could necessitate adjustments to maintain India’s dominance in the U.S. market, where we hold substantial shares in cut and polished diamonds (45.09%), gold jewellery (24.61%), and worked lab-grown stones (92.17%). The Indian gems and jewellery industry is not just an economic powerhouse but also a lifeline for directly employed over 2 lakh people who depend on it for livelihoods, many of whom are from economically weaker sections, including a significant number of women.”
Potential Shift in U.S. Sourcing
If tariffs on Indian jewellery increase, the U.S. might look to other global suppliers such as France, Italy, Switzerland, Jordan, and South Korea, which enjoy lower or zero-duty trade agreements.
Comparative Tariff Advantages for Other Countries
Certain nations hold significant tariff advantages over India in the U.S. market. For instance, Jordan benefits from duty-free access, while France and Italy impose just a 2.5% tariff on American jewellery imports—far below India’s 20% rate.
Possible Relocation Strategies for Indian Manufacturers
To counter the impact of higher tariffs, Indian jewellery manufacturers may explore relocating operations to countries like Oman, Singapore, or the UAE, leveraging these nations’ lower tariffs or Free Trade Agreements (FTAs) with the U.S.
Industry Proposals to Offset the Impact
To mitigate the potential impact of increased tariffs, the industry has proposed concessions under a potential India-U.S. Free Trade Agreement (FTA). Recommendations include reducing India’s tariffs on polished and lab-grown diamonds from 5% to 2.5%, lowering gold, silver, and platinum jewellery duties from 20% to 17%, and cutting import duties on gold bars from 5% to 4%. If implemented, these measures could stimulate U.S. exports to India, with projections estimating a $6.23 billion increase, including 65 tons of gold ($6 billion).
Call for Negotiation on a Balanced Duty Structure
Industry leaders stress the need for diplomatic negotiations to achieve a fair duty structure. “We need the Indian government to negotiate for a fair duty structure or consider lowering India’s import duty on U.S. jewellery to a more reciprocal level,” urges Kotwal. With a well-strategized approach, India’s jewellery sector can navigate this evolving trade landscape while maintaining its strong foothold in the U.S. market.
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